Question

Round off, if necessary, to the nearest dollar. Use a “+” or “-” where appropriate and a “$” for dollar value answers.

#1. If a bank has undesired excess reserves of $200, and if rr=25%, e=10% and c=10%, what is the value of the money multiplier? [Provide to three decimal places.]

#2. If a bank has undesired excess reserves of $200, and if rr=25%, e=10% and c=10%, then to restore equilibrium by how much will the money supply (M1) change? Be clear about whether this is a positive or negative change.

#3. If a bank has undesired excess reserves of $400 and where e=10%, c=10%, and m*=4.2, to restore equilibrium by how much will the money supply (M1) change? Be clear about whether this is a positive or negative change.

#4. If a bank has $21,000 in deposits, and $2,750 in reserves, and if rr=10%, e=2.5% and c=12%, how much undesired excess reserves does the bank have? Be clear about whether this is positive or negative.

#5. If a bank has $21,000 in deposits, and $2,750 in reserves, and if rr=10%, e=2.5% and c=12%, how much currency is in circulation? Be clear about whether this is positive or negative.

Answer 1